It’s common in most cases that a taxpayer will be required to fill out vital financial forms in order to receive consideration for any resolution. A frequent mistake most taxpayer’s make when drafting these forms is they often overstate their financial condition, one-way or another. When considering tax resolution, it’s important to know what is allowable and what is not. Adding frivolous expenses and overstating your position can lead the taxing authorities to believe you are filing “solely to delay” and may cause your proposal to be rejected immediately. Such a determination can be very damaging to a case and will likely result in enforcement against the taxpayer.
In many cases filing the form is only step one – you will have to prove your work. The taxing authorities will have push-back and will scrutinize all details to ensure they are getting the most out of collection and repayment. Having experienced representation puts you in the best position to have your case resolved. We understand the taxing authorities’ objective is only to collect the liability in the shortest amount of time possible. That is why Capstone Tax Consulting and its associates take ample time to review your unique financial condition, understand your goals, and reconcile all necessary documents. We work with you to perfect the taxing authority’s financial forms and ensure your best interest is met. These strategies will result in a resolution that is manageable for you and/or your business.
Below are just a few of the forms the taxing authorities will ask you to perfect, under the penalty of purgery.
433-A, Collection Statement for Wage Earner and Self-employed Individuals
This form is used to identify net income, equity in assets and investments. These figures, taken together, are calculated as “Future Collection Potential” (meaning they are they IRS/State are identifying how they can collect from you voluntarily or involuntary). Its important this is form is completed accurately because it is signed under the penalty of perjury
433-B, Collection Statement for Businesses
This form is used to identify the business’ viability and sustainability – the taxing authorities will look at equity in all business assets and investments as well as your revenue and expenses over the past 3 months. The IRS can make a determination to force a shutdown of the business if it does not show it’s sustainable while meeting its current tax obligations. To this end, it’s vital to work with a licensed individual. An Enrolled Agent will review this form and any proposal prior to being submitted because of the serious negative implications that can arise if done so without expertise. It’s important this is filled out correctly because it is signed under the penalty of perjury
Keep in mind, as a business corporate officer or member, you may be assessed with “Trust Fund Recovery Penalty” for you individually and may be required to complete a 433-A.
14134, Application for Certificate of Subordination of Federal Tax Lien
Liens are filed on a first-come first-serve basis so if the IRS and/or State files a tax lien, it will likely prevent you from obtaining lending. The lending institution will need to file a lien to protect their investment and they are typically unwilling to take a second seat to the IRS. The reason being, should any borrower default the IRS will get their money before the lender. However, with a sophisticated approach you can file IRS form 14134, generally in conjunction with a proposal to resolve the IRS tax debt, to request the IRS to lower its lien position to allow lending. Additionally, tax liens can prevent the sale of a home/asset.
656, Offer In Compromise
Form 656 must be completed in order to receive consideration for an Offer in Compromise (settlement). The IRS has a disclaimer on their website www.irs.gov: “The attached Form 656 is intended for tax professional use only and must not be used by the individual taxpayer…” The IRS is overwhelmed with submission offers, most of which will not be accepted for various reasons; but typically an individual does not know the proper way of submitting an offer and will not include pertinent documents to prove their situation warrants consideration. In some cases filing an offer incorrectly or “frivolously” can create negative case history because it may appear as if the taxpayer only filed it “solely to delay” collection of taxes outstanding.
14135, Application for Certificate of Discharge of Property from Federal Tax Lien
This form is used to discharge the federal tax lien for various reasons, even if the liability remains due. If you have paid your tax liability in full, you may file this form to have the lien withdrawn.